Legal advice to Central Coast Council at the beginning of October 2020 was to immediately notify the Office of Local Government (OLG) of its missing funds even though there was no legal duty to do so.
The advice was based on a still draft report that concluded that $218M was missing from Council’s internal and externally restricted funds.
Council was still waiting on the report to be finalised but it had sought advice on the ramifications.
The legal advice dated October 2, 2020, is now public because the advice document was requested by the current public inquiry.
Although there was no legal duty on the Council, or its officers, to notify any other body, it was the lawyers’ view that Council should notify the OLG.
“As the entity responsible for Local Government, the OLG may have expertise to assist Council to investigate and address the matter, including the liquidity problem,’’ the legal advice said.
“More significantly, however, the shortfall will ultimately become public knowledge, whether that be in the short or long term, at which point the OLG will inevitably take action.
“If Council is seen to be proactively and transparently taking action to involve the OLG and resolve the problem, this is likely to hold Council in better stead when the OLG, and ultimately the Minister, are considering the exercise of their powers of investigation and enforcement under the Local Government Act.
“Approaching the OLG now would also demonstrate that Council and its officers are aware of the significance ..,” the lawyers said.
Council advised the OLG on Tuesday, October 6, the day after a very busy long weekend for the Council as it grappled with its sudden and serious liquidity issues.
On October 6, the Minister for Local Government, Shelley Hancock, instructed the OLG to appoint an independent financial expert and a Human Resources adviser to ascertain Council’s true financial position and identify options to address the issues as quickly as possible.
“OLG has already held discussions with the Council’s CEO and senior staff and will continue to closely monitor the Council to ensure its ongoing sustainability,” Hancock said.
However, the staff were never appointed, or at least they never arrived on the Coast.
On October 21, the NSW Government advanced $6.2M for Council to meet payroll expenses and overdue payments to suppliers.
“It’s hard to think of a more fundamental failing of a Council than not to pay its own staff,” Hancock said at the time.
“The local community is sick of excuses from Council.
“In the two weeks since Council’s financial dire straits came to light, all Council has done is write letters, issue media releases and set up a finance committee,” she said.
One of those letters was to her.
Council had written on October 13 asking when the promised staff would arrive and also asking for urgent assistance on a number of matters.
These included advice on approval to borrow from restricted funds and how to secure external borrowing up to $100M from the NSW Treasury Corporation (TCorp), or any other emergency funding source to maintain liquidity until the 100-day recovery plan was implemented.
On October 16, a Council press release said it appeared that the Minister and the NSW Government were abandoning the Central Coast community and not standing by commitments to appoint an independent financial expert and a Human Resources advisor to ascertain Council’s true financial position.
“The Minister publicly stated in a media release on October 6 that these independent resources would be provided to support our local government organisation to help address these financial issues as quickly as possible,” said Mayor, Lisa Matthews, at the time.
Council was also still urgently seeking clarification from the Minister about borrowing from restricted funds and about securing up to $100M.
Then on October 21, the Minister said that Council had reached a new low at the previous night’s meeting by “deciding once again to approach the Government for a bailout at the risk of council staff not being paid.
“To use its own staff as bargaining chips is reprehensible from a governing body that has failed to address its own financial failings.
“There is no question that Council needs to be held responsible for these failures.
“That’s why today I will begin the process of suspending the mayor and councillors for their role in this sorry state of affairs.”
The councillors had a week to explain why they shouldn’t be suspended.
They submitted their reasons on October 28 but they were suspended on October 30.
Merilyn Vale